14 October 2025
Iliana Portugues
Two weeks ago, I attended a conference in Munich (apparently, the Oktoberfest tends to attract conferences and meetings). I watched a founder pitch his startup. Eighteen months old, €450K in combined grant funding and customer contracts with 92% gross margins. The panel's response was, "Come back when you have more commercial traction." The founder’s face fell. Three hours later, the same VCs enthusiastically discussed a nuclear fusion company that had just raised €1.8 billion. Their expected first revenue is in 2035.
Today, I'm going to tell you the uncomfortable truth about why your energy startup is actually failing.
Having analysed energy tech failures, interviewed founders who've burned through €2.8 billion collectively, and examined the investment patterns of 23 energy-focused VCs, I've documented an uncomfortable truth, already well known in Silicon Valley: The commercial traction excuse masks a fundamental failure to understand how VCs and energy organisations actually make decisions.
If you're reading this thinking "this doesn't apply to me," consider: every energy tech founder I've interviewed said the same thing. Six months before they ran out of runway.
The Problem Hidden in Plain Sight
The numbers tell a story that no one wants to acknowledge. CB Insights reports that 42% of startups fail due to "no market need" [3]. But, when you look more closely at energy tech specifically, you'll find that 75% of companies claiming traction issues show clear evidence of inadequate market research in their post-mortems [3]. One of my favourite examples, Better Place, burned through $850 million because they never properly researched battery swap station costs, projecting $500K when actual costs reached $2-4.4 million [4].
Consider another case, Solyndra's $535 million collapse. They didn't fail because of Chinese competition—a convenient story and excuse used to hide real issues. They failed because their market research underestimated the drop in polysilicon prices, which fell 89% after their launch, while their manufacturing costs were 300% higher than forecasted [5]. That's not a problem with commercial traction; it's a fundamental lack of understanding of market dynamics.
Overcoming Simon Sinek Syndrome
Here's where I get a bit controversial, and don't get me wrong, I do like the TED Talk he gave and listen to his content frequently. But Simon Sinek's "Start with Why" has, according to a LinkedIn analysis by Mark Godley, whom I tend to agree with, "ruined B2B tech marketing" [6].
In energy markets, this manifests catastrophically. Founders walk into utilities asking about their "vision for sustainability" instead of understanding that, on average, 6.8 different stakeholders are involved in every purchase decision—up from 5.4 just a decade ago [7]. Furthermore, their customer discovery plan gets centred on asking lots of 'why' questions, whereas in fact, for customer discovery, it should be about the 'what' and the 'how'.
I recently observed a founder's customer discovery call with the innovation director of a German utility. Twenty-three minutes discussing "transforming the energy landscape." Zero minutes understanding that procurement decisions require approval from operations (reliability concerns), finance (ROI calculations), regulatory affairs (compliance verification), and risk management (insurance implications). The innovation director loved the vision. The utility never bought the product.
I have also followed Steve Blank since my days at National Grid Partners. He also documented this phenomenon from a different angle in what he calls "phantom sales forecasts"—when individual enthusiasm never translates to organisational commitment [8]. The critical test is to ask, "Would you deploy this product if the price were zero?" Energy prospects often reveal solutions are "interesting" but not "mission-critical enough to justify disruption."
The Byzantine Reality of Energy Procurement
Energy sector procurement isn't slow or merely risk-averse; it's intentionally complex. A typical utility purchase can be divided into three phases:
Technology decisions take a minimum of 4-8 months (compared to 4-8 weeks in standard B2B environments).
There are 8-10 distinct stakeholder roles, often with conflicting priorities.
Full implementation requires 12-24 months, often preceded by 2-5 year pilot programs before commercial adoption.
Each stakeholder group has its own, sometimes contradictory, priorities: finance seeks reliable projections and maximum ROI; operations want minimal disruption; procurement aims for cost reduction; executives prioritise regulatory compliance; innovation teams look for cutting-edge technology; and risk management focuses on minimising foreseeable risks.
This complexity applies to existing processes and services. To introduce a value-added solution outside these established paths, you'll need to either first modify a process or procedure, or pinpoint the budget owner who will benefit from your solution.
McKinsey research confirms that energy companies often have situations where "end customers haven't defined decision-makers for energy services purchases" [9]. Different teams handle different services through separate processes. At one given time, no individual can tell you how the organisation actually buys everything.
The Answer Hidden in Nuclear Fusion's Market Research Masterclass
So, why do VCs fund fusion but reject your energy efficiency startup with revenue? The answer is a source of contention in all the conversations I have, but one thing is for sure: the answer isn't technology.
Breakthrough Energy Ventures operates with 20-year horizons, investing based on technical milestones and market assessments that show energy demand could triple due to AI and electrification [10]. They don't need commercial traction because they've conducted a thorough market structure analysis.
Bloomberg projects fusion as a $40 trillion opportunity by 2050 [11]. As geopolitics start to have a greater impact on commercial and competitive markets, and we return to a world of great-power politics, whoever cracks nuclear fusion first, while keeping competition far behind, will hold incredible superiority, not only through market growth but also by reducing alternative energy generation technologies to a minimum—the new Manhattan Project with trillion-euro stakes.
Chris Sacca's Lowercarbon Capital raised $250 million specifically for fusion, stating "Q>1 has shifted from hope to inevitability" [12]. (Q>1 is when fusion reactors produce more energy than they consume - a requirement that was finally proven in 2024 and changed the dynamics around this area). They invest based on physics feasibility and long-term market dynamics—actual research, not customer conversations about "pain points".
"Let that sink in. VCs will bet billions on splitting atoms in 2035 but won't bet millions on saving energy in 2025. That's not about risk—it's about research."
How Two Winners' Actually Did It
Opower, acquired by Oracle for $532 million, started with behavioural psychology research, not customer interviews. They discovered that "social proof" was the most effective motivator for energy efficiency—not savings or environmental benefits [13]. They built their entire model around competitive neighbourhood comparisons, an insight no utility would have articulated in a discovery call.
Sunrun became America's largest residential solar company, not because they asked customers if they wanted solar, everyone said yes. They asked why customers who wanted solar weren't buying it. The answer wasn't interest; it was the $15,000-$25,000 upfront cost barrier [14]. So they created Power Purchase Agreements with zero upfront costs, solving the actual problem.
Understanding the Organisational Ethnography Imperative
To succeed, you don't necessarily need to conduct more customer interviews; instead, you should focus on organisational ethnography.
Academic research shows that individual interviews often capture stated behaviours rather than actual organisational practices [15]. While this approach works well for B2C market development, it is less effective in the Energy Sector. This helps explain why corporate venturing teams have such varying success rates. To be effective, you should do the following:
Multi-site observational studies: Spend 3–5 days embedded within organisations, shadow personnel through their work cycles, and document actual decision-making processes.
Longitudinal engagement: Follow organisations through 12–18 month budget cycles to understand seasonal variations and map decision flows.
Regulatory archaeology: Study compliance workflows, examine how regulations shape operations, and identify informal regulatory relationships.To succeed, you don't need to conduct more customer interviews, you need to understand organisational ethnography.
The Uncomfortable Truth
The commercial traction excuse is a comfortable lie.
Fusion companies raise billions without products, while energy startups with solid grant funding, prototypes, and customers can't secure Series A funding. The issue isn't traction, VCs can sense when insufficient homework has been done.
Every week, another energy tech founder mistakes individual enthusiasm for organisational commitment, develops for markets that don’t exist, and blames failure on "lack of commercial traction." The real failure happened months earlier when they chose inspiring customer conversations over thorough market research.
Every week, another founder confuses "you haven’t done your homework" with "lack of commercial traction" and rushes to prospective customers, pitching undeveloped technologies and seeking LOIs for concepts far from commercialisation.
The answer isn’t to pivot faster or fail more cheaply.
It’s doing the unglamorous work of developing solid technology and cost roadmaps and validating them against real utility needs, not betting that your novel tech will solve a problem customers aren’t aware they have.
It’s learning how your offering creates real value, not just quoting oversized TAM/SAM/SOM figures to sound impressive.
It’s understanding how energy organisations truly operate, not how you wish they did.
The €3.2 billion question isn't whether your next energy startup will fail. It's whether you'll fail for a good or a preventable reason. VCs back fusion companies because they demonstrate deep market research, despite uncertain physics. They reject startups with working technology and shallow market understanding.
What's your take? Have you seen this happen in your market? Comments are open.
References
Commonwealth Fusion Systems, "Series B2 Funding Announcement," Canary Media, December 2021. Available: https://www.canarymedia.com/articles/nuclear/commonwealth-fusion-raises-1-8-billion
Canary Media, "The cleantech companies that did not make it through 2024," December 2024. Available: https://www.canarymedia.com/articles/clean-energy/cleantech-failures-2024
CB Insights, "The Top 12 Reasons Startups Fail," CB Insights Research Report, 2024. Available: https://www.cbinsights.com/research/startup-failure-reasons-top/
The Index Project, "Case Study: Better Place," 2024. Available: https://www.theindexproject.org/post/better-place-case-study
History Tools, "The Real Reason Solyndra Failed Spectacularly," 2024. Available: https://historytools.org/why-solyndra-failed/
M. Godley, "Simon Sinek, Your 18 Minutes Ruined B2B Tech Marketing," LinkedIn, 2024. Available: https://www.linkedin.com/pulse/simon-sinek-your-18-minutes-ruined-b2b-tech-marketing-mark-godley/
Harvard Business Review, "The Expanding Role of B2B Buying Groups," 2024. Available: https://hbr.org/2024/03/the-expanding-role-of-b2b-buying-groups
S. Blank, "The Phantom Sales Forecast -- Failing at Customer Validation," Steve Blank Blog, July 2010. Available: https://steveblank.com/2010/07/22/the-phantom-sales-forecast-failing-at-customer-validation/
McKinsey & Company, "Improving B2B energy propositions: Four trends reshaping the industry," 2024. Available: https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/improving-b2b-energy-propositions
Breakthrough Energy, "BEV Portfolio Investment Strategy," 2024. Available: https://www.breakthroughenergy.org/investing/bev-portfolio
Bloomberg NEF, "Fusion Energy Market Projections," 2024. Available: https://about.bnef.com/blog/fusion-energy-market-projections/
Lowercarbon Capital, "The Race to Q>1," October 2022. Available: https://lowercarboncapital.com/2022/10/12/the-race-to-q1/
Utility Dive, "What made Opower so successful?" 2014. Available: https://www.utilitydive.com/news/what-made-opower-so-successful/315642/
Sunrun Inc., "Investor Relations Annual Report," 2024. Available: https://investors.sunrun.com/financials/annual-reports/default.aspx
B2B International, "Ethnography in B2B - A Guide on What, When and How," 2024. Available: https://www.b2binternational.com/publications/ethnography-in-b2b/